UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
January 11, 1972
Clifford V. McGLOTTEN et al., Plaintiffs,
John B. CONNALLY et al., Defendants
The opinion of the court was delivered by: BAZELON
BAZELON, Chief Judge:
Plaintiff, a black American allegedly denied membership in Local Lodge #142 of the Benevolent and Protective Order of Elks solely because of his race,
brings this class action to enjoin the Secretary of Treasury
from granting tax benefits to fraternal and nonprofit organizations which exclude nonwhites from membership.
Relief is sought on three separate counts: first, that various sections of the Internal Revenue Code are unconstitutional to the extent that they authorize benefits under the income, estate, and gift taxes; second, that the Internal Revenue Code does not authorize such benefits;
and third, that such benefits are a form of federal financial assistance in violation of Title VI of the Civil Rights Act of 1964, 42 U.S.C. § 2000d et seq. Defendant now moves to dismiss the complaint on both jurisdictional grounds and for failing to state a claim upon which relief can be granted.
A. Three-Judge Court
We must first assess defendant's contention that 28 U.S.C. § 2282
does not authorize a three-judge court because the claim of unconstitutionality of the statute is not substantial,
and because plaintiff's attack is not upon the statute but upon the regulations and administrative action thereunder. See Sardino v. Federal Reserve Bank of New York, 361 F.2d 106, 113-116 (2nd Cir.), cert. denied, 385 U.S. 898, 87 S. Ct. 203, 17 L. Ed. 2d 130 (1966).
Section 2282 does not apply to suits seeking injunctions against administrative action, as distinguished from Acts of Congress. William Jameson & Co. v. Morgenthau, 307 U.S. 171, 173-174, 59 S. Ct. 804, 83 L. Ed. 1189 (1939). The Supreme Court has been less than clear in indicating how this distinction is to be determined in practice, particularly where the complaint is two-pronged, charging that the statute is unconstitutional and, in the alternative, that administrative action is beyond the authority granted by the statute. See Currie, The Three Judge Court in Constitutional Litigation, 32 U. Chi. L. Rev. 1, 37-55 (1964).
The Second Circuit has suggested in Sardino, supra, that the three-judge court procedure is not required where
an Act of Congress confers authority on an administrator in general terms which could be read either to embrace or to exclude the challenged action, and the application of the statute is clearly constitutional in certain cases but arguably not so in the administrative scheme under attack.
While this interpretation of § 2282 would appear to impose a sensible limitation on the use of an admittedly cumbersome procedure, recent Supreme Court decisions foreclose that course. In both Zemel v. Rusk
and Flast v. Cohen
the Court upheld the jurisdiction of three-judge courts on facts virtually indistinguishable from those in the present case.
We understand these decisions to require the convening of a three-judge court -- even where the attack is on the constitutionality of the statute as applied and coupled with a claim that the action in question was not authorized by the statute -- where the constitutional claim is itself substantial.
We find that plaintiff's constitutional claims are substantial, see Part IIA infra, and that a three-judge court was properly convened.
Defendant next contends that plaintiff lacks standing to challenge the constitutionality of the statutes in question. The Supreme Court has recently clarified this troubled area,
setting forth a two-part test for standing: 1) for purposes of the case or controversy requirement of Article III it must appear "that the challenged action has caused injury in fact, economic or otherwise;"
and 2) as a matter of judicial self-restraint, the court must determine "whether the interest sought to be protected by the complainant is arguably within the zone of interests to be protected or regulated by the statute or constitutional guarantee in question."
Plaintiff alleges two injuries as a result of the tax benefits in question: First, that the funds generated by such tax benefits enable segregated fraternal orders to maintain their racist membership policies; and second, that such benefits constitute an endorsement of blatantly discriminatory organizations by the Federal Government. We find both these allegations of injury sufficient to ensure that "the dispute sought to be adjudicated will be presented in an adversary context and in a form historically viewed as capable of judicial resolution."
Just as "[a] person or family may have a spiritual stake in First Amendment values sufficient to give standing to raise issues concerning the Establishment Clause and Free Exercise Clause,"
so a black American has standing to challenge a system of federal support and encouragement of segregated fraternal organizations.
C. Jurisdiction Under the Declaratory Judgment and Tax Injunction Acts
Defendant relies upon the provision of the Declaratory Judgment Act, 28 U.S.C. § 2201, which specifically excepts suits "with respect to Federal taxes" from its coverage.
In our view, the scope of this exception is coterminous with the breadth of the Tax Injunction Act, 26 U.S.C. § 7421 (a),
which forbids enjoining the collection or assessment of any tax. As originally passed in 1935,
the Declaratory Judgment Act did not contain the present exception for Federal taxes. The exception was added the following year
for the explicit purpose of limiting the jurisdiction of the courts to issue declaratory judgments in the same fashion as their general jurisdiction was limited by the Tax Injunction Act.
If the injunctive relief requested by plaintiff is barred by the Tax Injunction Act so too will relief be barred by the Declaratory Judgment Act.
In Enochs v. Williams Packing & Nav. Co., 370 U.S. 1, 82 S. Ct. 1125, 8 L. Ed. 2d 292 (1962), the Supreme Court stated that
[the] manifest purpose of § 7421 (a) is to permit the United States to assess and collect taxes alleged to be due without judicial intervention, and to require that the legal right to the disputed sums be determined in a suit for a refund. In this manner the United States is assured of prompt collection of its lawful revenue.
Id. at 7, 82 S. Ct. at 1129. Thus understood, § 7421 (a) ensures that the assessment and collection of taxes follows the procedure prescribed by the Internal Revenue Code. Objections, even on constitutional grounds, are to be determined in a suit for refund.
Plaintiff's action has nothing to do with the collection or assessment of taxes. He does not contest the amount of his own tax,
nor does he seek to limit the amount of tax revenue collectible by the United States. The preferred course of raising his objections in a suit for refund is not available. In this situation we cannot read the statute to bar the present suit. To hold otherwise would require the kind of ritualistic construction which the Supreme Court has repeatedly rejected. Even where the particular plaintiff objects to his own taxes, the Court has recognized that the literal terms of the statute do not apply when "the central purpose of the Act is inapplicable."
In the present case, the central purpose is clearly inapplicable. It follows that neither § 7421 (a) nor the exception to the Declaratory Judgment Act prohibits this suit.
II. Failure to State a Claim Upon Which Relief Can Be Granted
As noted above, plaintiff advances three separate theories in support of his right to relief. He challenges the constitutionality of the statute if, and to the extent that, it authorizes the grant of tax exempt status to nonprofit clubs and fraternal orders, and makes deductible contributions to such fraternal orders. He alternatively claims that the Internal Revenue Code does not authorize the deductibility of contributions to fraternal orders. Finally, plaintiff claims that both exemption from taxation and deductibility of contributions are federal financial assistance in violation of Title VI of the Civil Rights Act of 1964. Since a motion to dismiss for failure to state a claim tests the legal sufficiency of each count of the complaint, we must consider the counts separately.
A. Constitutionality of Federal Tax Benefits to Segregated Organizations
Better than one hundred years ago, this country sought to eliminate race as an operative fact in determining the quality of one's life. The decision has yet to be fully implemented. As Mr. Justice Douglas has pointedly stated: "Some badges of slavery remain today. While the institution has been outlawed, it has remained in the minds and hearts of many white men."
The minds and hearts of men may be beyond the purview of this or any other court; perhaps those who cling to infantile and ultimately self-destructive notions of their racial superiority cannot be forced to maturity. But the Fifth and Fourteenth Amendments do require that such individuals not be given solace in their delusions by the Government. Nor is this emphasis on the conduct of the Government misplaced. "Government is the social organ to which all in our society look for the promotion of liberty, justice, fair and equal treatment, and the setting of worthy norms and goals for social conduct. Therefore something is uniquely amiss in a society where the government, the authoritative oracle of community values, involves itself in racial discrimination."
Where that involvement is alleged, the courts have exercised the most careful scrutiny to ensure that the State lives up to its own promise.
Here plaintiff challenges the constitutionality of various provisions of the Internal Revenue Code to the extent that they authorize the grant of Federal tax benefits to organizations which exclude nonwhites from membership. These provisions exempt from income taxation nonprofit clubs (§ 501 (c) (7)) and fraternal orders (§ 501 (c) (8)) and make individual contributions to such fraternal orders deductible for income, estate, and gift taxes if the contributions are used "exclusively for religious, charitable, scientific, literary or educational purposes, or for the prevention of cruelty to children or animals." §§ 170 (c) (4), 642 (c), 2055, 2106 (a), 2522. Plaintiff's claim thus leads us into the murky waters
of the "state action" doctrine, for we must determine whether by granting tax benefits to private organizations which discriminate on the basis of race in membership, the Federal Government has supported or encouraged private discrimination so as to have itself violated plaintiff's right to the equal protection of the laws.
While a century ago, the phrase "state action"
may have sufficiently demarcated the extent of lawful state participation in private discrimination, that clarity has long since vanished in the wake of the greatly expanded role of government in a modern, industrial society. Whether by licensing,
few activities are left wholly untouched by the arm of Government. The responsibilities of the Government under the Fifth and Fourteenth Amendments, however, are not diluted by the expanded scope of Government,
and our inquiry has become necessarily more detailed. "[Only] by sifting facts and weighing circumstances can the nonobvious involvement of the State in private conduct be attributed its true significance." Burton v. Wilmington Parking Authority, 365 U.S. 715, 722, 81 S. Ct. 856, 860, 6 L. Ed. 2d 45 (1961).
1. The Deductibility of Contributions to Fraternal Orders.
To demonstrate the unconstitutionality of the challenged deductions plaintiff must, of course, show that they in fact aid, perpetuate, or encourage racial discrimination.
He alleges, subject to proof at trial, both the substantiality of the benefits provided
and a causal relation to the discrimination practiced by the segregated organizations.
But more is required to find a violation of the Constitution. Every deduction in the tax laws provides a benefit to the class who may take advantage of it. And the withdrawal of that benefit would often act as a substantial incentive to eliminate the behavior which caused the change in status. Yet the provision of an income tax deduction for mortgage interest paid
has not been held sufficient to make the Federal Government a "joint participant"
in the bigotry practiced by a homeowner. An additional line of inquiry is essential, one considering the nature of the Government activity in providing the challenged benefit and necessarily involving the sifting and weighing prescribed in Burton. *fn41"
The rationale for allowing the deduction of charitable contributions has historically been that by doing so, the Government relieves itself of the burden of meeting public needs which in the absence of charitable activity would fall on the shoulders of the Government. "The Government is compensated for its loss of revenue by its relief from financial burdens which would otherwise have to be met by appropriations from public funds." H.Rep. No. 1860, 75th Cong., 3rd Sess. 19 (1938). And here the Government does more than simply authorize deduction of contributions to any cause which the individual taxpayer deems charitable. The statute, regulations, and administrative rulings thereunder, define in extensive detail not only the purposes which will satisfy the statute, but the vehicles through which those purposes may be achieved as well. A contribution, even for an approved purpose, is deductible only if made to an organization of the type specified in § 170 and which has obtained a ruling or letter of determination from the Internal Revenue Service. Thus the government has marked certain organizations as " Government Approved " with the result that such organizations may solicit funds from the general public on the basis of that approval.
In our view, the Government has become sufficiently entwined with private parties to call forth a duty to ensure compliance with the Fifth Amendment by the parties through whom it chooses to act.
We see no difference in the degree to which the Government has "[placed] its power, property and prestige behind the admitted discrimination," Burton v. Wilmington Parking Authority, supra, at 725, 81 S. Ct. at 862, where a private restaurant in a government owned parking facility refuses service to black patrons, and where a tax supported organization by its constitution admits only "white male citizens."
The public nature of the activity delegated to the organization in question, the degree of control the Government has retained as to the purposes and organizations which may benefit, and the aura of Government approval inherent in an exempt ruling by the Internal Revenue Service, all serve to distinguish the benefits at issue from the general run of deductions available under the Internal Revenue Code. Certain deductions provided by the Code do not act as matching grants, but are merely attempts to provide for an equitable measure of net income.
Others are simply part of the structure of an income tax based on ability to pay.
We recognize that an additional class of deductions -- such as accelerated depreciation for rehabilitated low income rental property,
or deductions for mortgage interest
-- do act as "incentives" favoring certain types of activities. But unlike the charitable deductions before us, these provisions go no further than simply indicating the activities hoped to be encouraged; they do not expressly choose fraternal organizations as a vehicle for that activity and do not allow such organizations to represent themselves as having the imprimatur of the Government. This seems to us a significant difference of degree in an area where no bright-line rule is possible.
2. The Exemption From Income Tax For Nonprofit Clubs and Fraternal Orders.
The exemptions from income taxation for nonprofit clubs (§ 501 (c) (7)) and fraternal orders (§ 501 (c) (8)) present more difficult problems. Because their tax treatment is not identical, we consider the exemptions for the two types of groups separately.
Plaintiff's claim of unconstitutional aid to private discrimination rests on the following syllogism: Since the Government imposes a tax on all income, § 61 (a), and then exempts from taxation the income of nonprofit clubs, an affirmative benefit or subsidy has been provided the exempted groups. After the Tax Reform Act of 1969,
the treatment of exempt nonprofit clubs is that all their income, including passive investment income, is taxed at regular corporate rates.
They are, however, allowed the equivalent of a deduction for "exempt function income,"
defined essentially as income derived from members.
It is therefore this deduction which provides the allegedly unconstitutional aid.
Unlike the deduction for charitable contributions, the deduction for "exempt function income" does not operate to provide a grant of federal funds through the tax system. Rather, it is part and parcel of defining appropriate subjects of taxation. Congress has determined that in a situation where individuals have banded together to provide recreational facilities on a mutual basis, it would be conceptually erroneous to impose a tax on the organization as a separate entity. The funds exempted are received only from the members and any "profit" which results from overcharging for the use of the facilities still belongs to the same members. No income of the sort usually taxed has been generated; the money has simply been shifted from one pocket to another, both within the same pair of pants. Thus the exclusion of member generated revenue reflects a determination that as to these funds the organization does not operate as a separate entity.
That the Government provides no monetary benefit does not, however, insulate its involvement from constitutional scrutiny. The lease in Burton was, as far as the record shows, entirely arm's length with no provision of federal property at less than market value. Encouragement of discrimination through the appearance of governmental approval may also be sufficient involvement to violate the Constitution. But here the necessary involvement is not readily apparent. Section 501 (c) (7) does not limit its coverage to particular activities; exemption is given to "[clubs] organized and operated exclusively for pleasure, recreation and other nonprofitable purposes. . ." (emphasis added.) Thus there is no mark of Government approval inherent in the designation of a group as exempt. Congress has simply chosen not to tax a particular type of revenue because it is not within the scope sought to be taxed by the statute. And however dysfunctional the "state action" limitation is at a time when the nation has sufficiently matured that the elimination of racial discrimination is a cornerstone of national policy, it still means that Congress does not violate the Constitution by failing to tax private discrimination where there is no other act of Government involvement. To find a violation solely from the State's failure to act would, however laudably, eliminate the "state action" doctrine and that must come from the Supreme Court.
The motion to dismiss is granted as to the claim that the exemption for § 501 (c) (7) nonprofit clubs violates the Constitution.
The exemption given to fraternal organizations under § 501 (c) (8) stands on different footing. Unlike nonprofit clubs, fraternal organizations are taxed only on "unrelated business taxable income" defined as "any trade or business the conduct of which is not substantially related (aside from the need of such organization for income or funds or the use it makes of the profits derived) to the exercise or performance by such organization of its charitable, educational, or other purpose or function constituting the basis for the exemption under section 501 . . ."
The crucial impact of this differential treatment is that the passive investment income of fraternal orders is not taxed.
This exemption cannot be explained simply by the inappropriateness of taxing the organization as a separate entity in this situation. Here individuals are providing funds which are then invested for the purposes of benefiting the contributing members, and the exemption of this income is a "benefit" provided by the Government.
We think this exclusion, provided only to particular organizations with particular purposes, rather than across the board, is sufficient government involvement to invoke the Fifth Amendment. By providing differential treatment to only selected organizations, the Government has indicated approval of the organizations and hence their discriminatory practice, and aided that discrimination by the provision of federal tax benefits.
B. Claim that the Internal Revenue Code Does Not Authorize the Deductibility of Contributions to Segregated Fraternal Organizations.
Plaintiff also alleges that the deductibility of contributions to fraternal organizations which exclude nonwhites from membership is not authorized by the Internal Revenue Code.
Contributions to fraternal organizations exempt under § 501 (c) (8) are deductible under §§ 170 (c) (4), 642 (c), 2055, 2106 (a), and 2522, if used exclusively for the purposes there listed. Plaintiff argues that because such contributions also perpetuate the existence of an organization which discriminates on the basis of race, the exclusivity requirement is not satisfied.
Only recently a three-judge court of this District considered the application of the statutes in question to the benefits granted to segregated private schools. Green v. Connally, 330 F. Supp. 1150 (D.D.C.1971), aff'd sub nom. Coit v. Green, 404 U.S. 997, 92 S. Ct. 564, 30 L. Ed. 2d 550 (1971) (mem.). The Court there held that since "the Congressional intent in providing tax deductions and exemptions is not construed to be applicable to activities that are either illegal or against public policy,"
the overwhelming federal policy against segregated education required that the Internal Revenue Code "no longer be construed so as to provide private schools operating on a racially discriminatory premise the support of the exemptions and deductions which Federal tax law affords to charitable organizations and their sponsors."
In Green, the Court felt its construction of the Code was "underscored by the fact that it obviates the need to determine . . . serious constitutional claims."
Since the constitutional claim here, unlike in Green,63 was challenged by a motion to dismiss, and since we therefore cannot avoid plaintiff's serious constitutional claim, we have already determined that the tax deductions in question, if authorized, would violate the Fifth Amendment.
As such, we would be bound to interpret the Code as not allowing the deduction of contributions to segregated fraternal orders. We do not think, however, that the correctness of that construction depends on the finding of state action which underlies our constitutional determination. The Thirteenth Amendment clothed "Congress with power to pass all laws necessary and proper for abolishing all badges and incidents of slavery in the United States," Civil Rights Cases, 109 U.S. 3, 20, 3 S. Ct. 18, 28, 27 L. Ed. 835 (1883), and that expression of constitutional concern has been held to include acts of private discrimination. Jones v. Alfred H. Mayer Co., 392 U.S. 409, 88 S. Ct. 2186, 20 L. Ed. 2d 1189 (1968). Further, in what we find an analogous area, Congress, by Section 601 of the Civil Rights Act of 1964, 42 U.S.C. § 2000d, has provided that racial discrimination cannot be practiced by those receiving "federal financial assistance." Whether or not tax benefits of the sort at issue here are "federal financial assistance" within the terms of the Civil Rights Act, see Part IIC infra, there is a clearly indicated Congressional policy that the beneficiaries of federal largesse should not discriminate. We think this overriding public policy, even in the absence of our constitutional holding in Part IIA, requires that the Code not be construed to allow the deduction of contributions to organizations which exclude nonwhites from membership.
C. Claim Under the 1964 Civil Rights Act
Plaintiff's final allegation is that the granting of federal tax benefits to organizations which exclude nonwhites from membership is a form of "federal financial assistance" in violation of 42 U.S.C. § 2000d which provides that:
No person in the United States shall, on the ground of race, color, or national origin, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving Federal financial assistance.
Section 602, 42 U.S.C. § 2000d-1 defines "federal financial assistance" as "assistance to any program or activity, by way of grant, loan, or contract other than a contract of insurance or guaranty." (emphasis added). The apparently standard regulation issued by federal agencies pursuant to § 2000d-1 reads:
The term "federal financial assistance" includes (1) grants and loans of Federal funds, (2) the grant or donation of Federal property and interests in property, (3) the detail of Federal personnel, (4) the sale and lease of, and the permission to use (on other than a casual or transient basis), Federal property or any interest in such property without consideration or at a nominal consideration, or at a consideration which is reduced for the purpose of assisting the recipient, or in recognition of the public interest to be served by such sale or lease to the recipient, and (5) any Federal agreement, arrangement, or other contract which has as one of its purposes the provision of assistance.
Plaintiff contends that since "federal financial assistance" has been construed to cover such indirect forms of aid as the detail of federal personnel, or the sale of property at a reduced consideration, it must necessarily cover the provision of similar aid through the income, estate, and gift taxes which, if direct, would certainly be covered by the statute. Nothing in the massive legislative history of the 1964 Civil Rights Act sheds any light on whether assistance provided through the tax system was intended to be treated differently than assistance provided directly.
In the absence of strong legislative history to the contrary, the plain purpose of the statute is controlling. Here that purpose is clearly to eliminate discrimination in programs or activities benefitting from federal financial assistance. Distinctions as to the method of distribution of federal funds or their equivalent seem beside the point, as the regulations issued by the various agencies make apparent.
Defendant's only argument as to why the Act should be construed to exclude from its coverage assistance plainly within its purpose, is that otherwise any deduction provided under the Internal Revenue Code becomes a potential vehicle for a suit against the Internal Revenue Service under Title VI. We have already indicated, however, that the deductions provided in the Code are not all cut from the same cloth.
Most relate primarily to the operation of the tax itself, and thus would not constitute a grant of federal financial assistance. And where a Code provision does operate to provide such assistance, it is within the purpose of the statute and the possibility of litigation follows naturally.
We hold that assistance provided through the tax system is within the scope of Title VI of the 1964 Civil Rights Act, and thus turn to the particular provisions challenged by Plaintiff.
1. The Deductibility of Contributions to § 501 (c) (8) Fraternal Orders
We think there is little question that the provision of a tax deduction for charitable contributions is a grant of federal financial assistance within the scope of the 1964 Civil Rights Act. "The charitable contribution deduction is a special tax provision not required by, and contrary to, widely accepted definitions of income applicable to the determination of the structure of an income tax."
It operates in effect as a Government matching grant
and is available only for the particular purposes and to the particular organizations outlined in the Code.
We see no difference between the provision of Federal property "at a consideration which is reduced . . . in recognition of the public interest to be served by such sale or lease to the recipient," and a tax deduction in the form of a matching grant provided for contributions to causes deemed worthy by the Internal Revenue Code.
2. The Exemption from Income Tax for Nonprofit Clubs and Fraternal Orders
The tax exemptions provided nonprofit clubs and fraternal orders again raise more difficult problems. We have already indicated that the exemption of nonprofit clubs, limited as it is to member-generated funds and available regardless of the nature of the activity of the particular club, does not operate as a "grant" of Federal funds.
As such, the exemption does not come within the scope of the 1964 Civil Rights Act, and the motion to dismiss is granted as to this part of plaintiff's claim.
We have also indicated, however, that the exemption provided fraternal orders by § 501 (c) (8) is of wider scope, shielding from taxation not only member-generated funds but passive investment income as well. Unlike the exemption for nonprofit clubs, it cannot be explained simply as a matter of pure tax policy.
Since it is available only to particular groups, it operates in fact as a subsidy in favor of the particular activities these groups are pursuing. It thus falls within the coverage of the Civil Rights Act.
We have no illusion that our holding today will put an end to racial discrimination or significantly dismantle the social and economic barriers that may be more subtle, but are surely no less destructive. Individuals may retain their own beliefs, however odious or offensive. But the Supreme Court has declared that the Constitution forbids the Government from supporting and encouraging such beliefs. By eliminating one more of the "nonobvious [involvements] of the State in private conduct,"
we obey the Court's command to quarantine racism.
APPENDIX: PERTINENT SECTIONS OF THE INTERNAL REVENUE CODE
SEC. 170. Charitable, etc., contributions and gifts.
(a) Allowance of Deduction. --
(1) General rule. -- There shall be allowed as a deduction any charitable contribution (as defined in subsection (c)) payment of which is made within the taxable year. A charitable contribution shall be allowable as a deduction only if verified under regulations prescribed by the Secretary or his delegate.
* * *
(c) Charitable Contribution Defined. -- For purposes of this section, the term "charitable contribution" means a contribution or gift to or for the use of --
* * *
(4) In the case of a contribution or gift by an individual, a domestic fraternal society, order, or association, operating under the lodge system, but only if such contribution or gift is to be used exclusively for religious, charitable, scientific, literary, or educational purposes, or for the prevention of cruelty to children or animals.
SEC. 501. Exemption from tax on corporations, certain trusts, etc.
(a) Exemption From Taxation. -- An organization described in subsection (c) or (d) or section 401 (a) shall be exempt from taxation under this subtitle unless such exemption is denied under section 502 or 503.
* * *
(c) List of Exempt Organizations. -- The following organizations are referred to in subsection (a):
* * *
(7) Clubs organized and operated exclusively for pleasure, recreation, and other nonprofitable purposes, no part of the net earnings of which inures to the benefit of any private shareholder.
(8) Fraternal beneficiary societies, orders, of associations --
(A) operating under the lodge system or for the exclusive benefit of the members of a fraternity itself operating under the lodge system, and
(b) providing for the payment of life, sick, accident, or other benefits to the members of such society, order, or association or their dependents.
SEC. 642. Special rules for credits and deductions
(c) Deductions for Amounts Paid or Permanently Set Aside For a Charitable Purpose. --
(1) General Rule. -- In the case of an estate or trust . . . there shall be allowed as a deduction in computing its taxable income (in lieu of the deduction allowed by section 170 (a) . . .) any amount of the gross income, without limitation, which pursuant to the terms of the governing instrument is, during the taxable year, paid for a purpose specified in section 170 (c). . . .
SEC. 2055. Transfers for public, charitable and religious uses.
(a) In General. -- For purposes of the tax imposed by section 2001, the value of the taxable estate shall be determined by deducting from the value of the gross estate the amount of all bequests, legacies, devises, or transfers (including the interest which falls into any such bequest, legacy, devise, or transfer as a result of an irrevocable disclaimer of a bequest, legacy, devise, transfer, or power, if the disclaimer is made before the date prescribed for the filing of the estate tax return) --
SEC. 2106. Taxable estate.
(a) Definition of Taxable Estate. -- For purposes of the tax imposed by section 2101, the value of the taxable estate of every decedent nonresident not a citizen of the United States shall be determined by deducting from the value of that part of his gross estate which at the time of his death is situated in the United States --
* * *
(2) Transfers for public, charitable, and religious uses. --
(A) In general. -- The amount of all bequests, legacies, devises, or transfers (including the interest which falls into any such bequest, legacy, devise, or transfer as a result of an irrevocable disclaimer of a bequest, legacy, devise, transfer, or power, if the disclaimer is made before the date prescribed for the filing of the estate tax return) --
* * *
(iii) to a trustee or trustees, or a fraternal society, order, or association operating under the lodge system, but only if such contributions or gifts are to be used within the United States by such trustee or trustees, or by such fraternal society, order, or association, exclusively for religious, charitable, scientific, literary, or educational purposes, or for the prevention of cruelty to children or animals, . . .
SEC. 2522. Charitable and similar gifts.
(a) Citizens or Residents. -- In computing taxable gifts for the calendar year, there shall be allowed as a deduction in the case of a citizen or resident the amount of all gifts made during such year to or for the use of --
* * *
(3) a fraternal society, order, or association, operating under the lodge system, but only if such gifts are to be used exclusively for religious, charitable, scientific, literary, or educational purposes, including the encouragement of art and the prevention of cruelty to children or animals; . . .